U.S. stocks close at five-year high; Treasuries gain, yen falls

U.S. stocks closed at a five-year high and Treasuries rose for the fifth time in six days as investors weighed prospects for a short-term lift in the U.S. debt ceiling. The yen traded at a 2 1/2-year low.

The Standard & Poor’s 500 Index increased 0.3 percent to 1,485.83 at 4 p.m. in New York and the Dow Jones Industrial Average added 54 points to 13,649.54, with both ending the week at the highest levels since 2007. Ten-year U.S. yields slid four basis points to 1.84 percent. Japan’s currency traded for more than 90 per dollar for a second day for the first time since June 2010, and the Topix Index capped a 10th straight weekly advance, on signs the central bank will extend asset purchases. Hong Kong-traded shares of Chinese companies jumped to a 17- month high and commodities rose as China’s growth quickened.

House Republicans plan to vote next week on a three-month extension of U.S. borrowing authority in an effort to force the Democratic-led Senate to adopt a budget plan. Word of the plan helped the equity market recover from an early retreat triggered by a drop in consumer confidence to a 13-month low and disappointing earnings from Intel Corp. and Capital One Financial Corp.

“Anything that gets Congress to think about things and come up with a solution ahead of time provides some reassurance,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a phone interview. His firm oversees $20 billion. “It’s pretty early to be exuberant. Don’t forget that we still have substantial debt problems, the economy is still sluggish and companies are beating low-balled estimates. We need to be careful that we don’t get too far ahead of ourselves.”

Debt Ceiling Debate

Two-year Treasury yields declined one basis point to 0.25 percent, while rates on 30-year bonds decreased four points to 3.03 percent. The Treasury Department has said the U.S. will exceed its $16.4 trillion borrowing authority sometime from mid- February to early March.

Benchmark notes briefly pared gains on a report the House will pass a three-month debt-limit increase next month, only to extend them once more after Speaker John Boehner said a budget that cuts spending must be passed before any long-term deal is reached. The Federal Reserve purchased $1.565 billion of bonds maturing from February 2036 to November 2042 amid its struggle to restore growth in the world’s largest economy.

In the stock market, the S&P 500 capped a third straight weekly gain and needs to rise about 5.5 percent to reclaim its 2007 record close of 1,565.15. General Electric Co. rallied after fourth-quarter profit topped estimates amid across-the- board growth in industrial and finance business.